Hilton Grand Vacations Inc

Good morning and welcome to the Hilton Grand Vacations third quarter 2024 earnings conference call. A telephone replay will be available for seven days following the call. The dial-in number for that is 844-512-2921 and enter PIN 10193742. At this time all participants have placed in a listen only mode and the floor will be open for your questions following this presentation. If you would like to ask a question, please press star, then 1 on your touchtone phone to enter the queue. If at any point your question has been answered, you may remove yourself from the queue by pressing star, then 2. If you should require operator assistance, please press star, then 0. And if you're using a speakerphone, please lift your handset to allow the signal to reach our equipment. Please limit yourself to one question and one follow-up to allow the opportunity for everyone to ask questions. And you may re-enter the queue to ask additional questions if need be. I would now like to turn the call over to Mark Melnick, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator, and welcome to the Hilton Grand Vacation's third quarter 2024 earnings call. As a reminder, our discussions this morning will include forward-looking statements. Actual results could differ materially from those indicated by these forward-looking statements. These statements are effective only as of today. We undertake no obligation to publicly update or revise these statements. For discussion of some of the factors that could cause actual results to differ, please see the risk factors section of our SEC file. We'll also be referring to certain non-GAAP financial measures. You can find definitions of components of such non-GAAP measures, as well as reconciliations of non-GAAP and GAAP financial measures discussed today in our earnings press release and on our website at investors.hgv.com. Our reported results for all periods reflect accounting rules under ASC 606, which we adopted in 2018. Under ASC 606, we're required to defer certain revenues and expenses related to sales made in the period when a project is under construction and then hold off on recognizing those revenues and expenses until the period when the project is completed. For ease of comparability and to simplify our discussion today, our comments on adjusted EBITDA and our real estate results will refer to results excluding the net impact of construction related deferrals and recognitions for all reporting periods. To help you make more meaningful period-to-period comparisons, you can find details of our current and historical deferrals and recognitions in Table T1 of our earnings release, and a complete accounting of our historical deferral and recognition activity can also be found in Excel format on the financial reporting section of our Investor Relations website. In a moment, our Chief Executive Officer Mark Wang will provide highlights from the quarter in addition to an update of our current operations and company strategy. After Mark's comments, Our President and Chief Financial Officer, Dan Matthews, will go through the financial details for the quarter. Mark and Dan will then make themselves available for your questions. With that, let me turn the call over to our CEO, Mark Wang. Mark?

Good morning, everyone, and welcome to our third quarter earnings call. Before we begin, I want to give a special thank you to our team members in recognition of their efforts during this hurricane season. With two major hurricanes back-to-back causing tremendous damage across multiple states, I'm extremely proud of how our field and corporate teams responded in the midst of these natural disasters to provide continued service to our guests, as well as to support our impacted team members. We're committed to providing relief to all of those affected by the storms through our contribution to the Red Cross, along with additional support for our team members in their time of need. Turning to the third quarter results, we're encouraged by our progress on our strategic initiatives this quarter. We continue to execute against the cost synergies we identified as part of our blue-green acquisition and are tracking ahead of our assumptions. We're also seeing some positive signs following the organization changes we discussed with you last quarter. As a reminder, those changes were focused on two key areas, regionalization and staffing. with a goal of driving increased consistency in our sales and marketing execution. We made solid progress on both fronts, which I'll cover further in a moment. Importantly, those changes have begun to produce some early positive outcomes. We've started to see better results in our new buyer business. Our overall VPGs in October improved despite the terrible storm activity. We're also looking forward to introducing HEV MAX to our blue-green members, which we expect will appeal to both new buyers as well as owners who have been eagerly awaiting the program. And based on our trends and initiatives, we're optimistic about our momentum when we look at our close rates and BPGs. Now, while the disruption from the reorganization is behind us, there are still some challenges that remain. It will take some time for us to reach optimum staffing levels in our sales and marketing teams. The macro environment still presents headwinds for some of our consumers. And in the very near term, we did experience some tour volume impacts related to the storms. Looking beyond these near-term challenges, we're pleased with our execution and are expecting further operational improvements in the quarter ahead. I'm confident with our strategy and that we have the right scale, structure, and leadership in place to create long-term value for our shareholders. Turning to our results for the quarter, reported contract sales were $777 million and adjusted EBITDA was $276 million with margins of 22%, which were in line with our expectations. Contract sales in the quarter were driven by lower tours and VPG, Looking at tours, our owner business showed steady growth during the quarter, and we expect the upcoming launch of HEV Max and the Blue Green system will attract more of our owners to tour and explore the new options available to them. Tour trends in our new buyer business showed a decline that was in line with what we saw in the second quarter. However, we're continuing to make adjustments to our channels to improve our efficiency And we also lost several thousand tours to Hurricane Debbie and Helene during the period. Staying on the topic of hurricanes, while we believe the storm impact was minimal in the third quarter, we expect more impact to our fourth quarter. And Dan will get more into those details shortly. BPG for the quarter was $3,392. demonstrating sequential growth in the period that historically dipped slightly from the second quarter levels. Our new buyer segment, in particular, improved to the best close rate of the year, and within our legacy HCV DRI business, our new buyer close rates returned to growth against the prior year's quarter. And, as I mentioned, we're encouraged that VPG performance improved further in October, despite the impacts from the back-to-back hurricanes we experienced. Looking at our demand indicators, occupancy in the quarter was up about two points to 83%, reflecting gains in some of our mainland markets, as well as lapping the occupancy reductions from last year's Maui wildfires. Consolidated arrivals for the fourth quarter are ahead of last year, with particularly strong rental demand, And our marketing package pipeline added 15,000 packages from the second quarter, growing to over 720,000 packages. Turning to the non-real estate segments, we ended the quarter with 722,000 members and NOG of 1.2%, which aided the performance of our recurring club and resort business. We're up to 181,000 HCV MAX members today, which is 40% higher than it was at the same time period last year. We've had great success since launching the program, and we expect to keep that momentum going as we roll out MAX to the Blue-Green system. Our financing business continues to manage well through the environment and execute on additional well-subscribed ABS offerings to provide cash flow to our business, including a deal we just priced last week. and our rental business continued to benefit from solid traveler demand. Turning to our cash flow, we're on track to produce a record amount of cash flow this year, and we're also on track to return a record amount of cash to our shareholders through repurchases. This quarter, we repurchased 2.8 million shares of stock for $108 million. Now let me provide an update on our strategic initiatives. As I mentioned, we continue to track ahead of our cost synergies. In addition, I'm also glad to say that the bulk of the disruption from the reorganization is now behind us. Over the course of the quarter, we finalized the deployment of our new regional sales and marketing structure, including the appointments of key leadership positions in each of those regions. The new structure aligns our support across our wider geographic portfolio, and moves key decision makers closer to our frontline teams. We've also provided our teams with additional tools to enhance their flexibility in the form of non-cash incentives, promotions, and options to enable them to tailor the tour experience to the customer's needs, making it easier for new buyers to enter the system and provide further value for our owners as they upgrade into the higher tiers of HCV Max. The second area of focus we discussed in our last call was staffing, and I'm pleased to report that here, too, we've made solid progress. Our teams have taken action to fill staffing gaps in markets where we needed to improve our sales efficiency metrics, particularly on our new buyer sales teams. And I'm happy to say that our staffing levels are in the best position they've been all year with a plan for further improvement, which will aid our tour efficiency and close rates. In addition to those areas, we continue to make progress with our partnership programs. This includes our Great Wolf Partnership, which is advancing at full speed and bringing in new young families into the HCV system. In Q3, we opened four new retail outlets in Great Wolf locations to offer packages and are working on four additional openings within the year. We continue to receive positive feedback from our owners using their points for additional and shorter getaways at Great Wolf locations. And the VPG across direct marketing channels confirm the high level of customer affinity between the two brands. Turning to our rebranding efforts, we remain on track to have 80% of Diamond's targeted keys rebranded by year end. And we're making good progress in our plans for rebranding blue-green assets as well. The majority of the assets will become Hilton Vacation Club properties, although there are a handful of unique properties that will become part of the Hilton Grant Vacations brand. As was the case with Diamond, we'll stage the rebranding of the Blue Green properties over the next few years, with the majority of the units slated to be rebranded by the end of 2026. As I mentioned earlier, we're looking forward to introducing HEV Max to the Blue Green system We think that the addition of Max will provide new buyers with a compelling offering and motivate existing owners to upgrade their membership with us, providing Blue Green members access to the world renowned Hilton ecosystem for the first time. I'm also excited to announce that we acquired a property in Kyoto, which we'll be converting to become our third property within Japan. If you recall, We were the first international timeshare company to introduce its brand in Japan. And our Sissoko property has been so successful that we're rapidly approaching sellout ahead of schedule. As a leading destination in Japan with 75 million visitors a year, comparable to Orlando, we know Kyoto is popular with the Japanese, and we believe the property will be very well received. We expect to start selling the project in the middle of next year, and we think it's another great example of our ability to leverage our broad geographic reach, including 12 sales centers in Japan, to attract significant numbers of Japanese travelers who prefer domestic stays. So in summary, we continue to make solid strategic progress, and looking at the results of the quarter, I come away optimistic. While there's still some challenges ahead of us, we're actively adjusting to the environment and have initiatives in place to improve our overall execution in the quarters ahead. We remain confident with our strategy around our recent acquisition. We have the right scale, the right inventory, and the right product. And with our structure in place, we're focused on execution in the coming quarters to maximize those assets and deliver value for our shareholders. With that, I'll turn it over to Dan to talk you through the numbers. Dan.